Gold prices breach $1,000

First time metal rises above $1,000 per ounce since February
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Gold prices soared past the $1,000 per ounce mark for only the third time ever on Tuesday.

Technical trading reasons, as opposed to retail industrial demand, are thought to be behind the rise, with a lack of short-dated call options contributing to the surge. "Given the market positioning and technical buying that has supported the recent rally, we believe prices could suffer from profit-taking in the short term before resuming their uptrend," Suki Cooper, a precious metals analyst for Barclays Capital said.

The slump on the dollar against other major currencies is also thought to have contributed to the surge.

Gold first breached $1,000 in March 2008 but then fell back before soaring again in February 2009. However, analysts believe this breach is more likely as markets shift their gaze from deflation to inflation and speculation on a smaller role for the dollar in the future global monetary order mounts.

Cooper said: "Last March, a plethora of price-positive drivers culminated to boost prices ranging from market uncertainty to a falling dollar. However, aside from discussions over moving away from the dollar as a global reserve currency, the current macro environment is not necessarily as favourable for gold, but we do believe it could evolve to become more so given concerns over rising inflation and our expectations for the dollar to weaken further."

Last month, gold rose slightly after European central banks and the International Monetary Fund agreed to sell a maximum of 400 tonnes in the market per year for the next five years.

 

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